COMMENT CALL: The CFPB has issued a Request for Information (RFI), asking the public to weigh in on the fees charged by banks, credit unions, and other financial companies. This is the first step in “an initiative to save households billions of dollars a year by reducing exploitative junk fees …,” the CFPB wrote in a press release.
CUNA and other national trade groups immediately denounced the CFPB’s announcement as a “misguided effort that paints a distorted and misleading picture of our country’s highly competitive financial services marketplace.”
The CFPB has not proposed any new rules related to fees. Instead, the RFI is meant to gather information, a first step in the regulatory process. “Today’s request is a chance for the public to share input that will help shape the agency’s rulemaking and guidance agenda, as well as its enforcement priorities in the coming months and years,” the CFPB explained.
Many fees in question
The RFI specifically questions certain types of fees that credit unions and other financial services providers may charge. The RFI singles out the following:
Deposit Accounts. The price of a deposit account is made up of, among other fees, account maintenance fees, minimum balance fees, savings transfer fees, NSF fees, overdraft fees, and ATM fees. Overdraft and NSF fees are back-end fees that make up the majority of total revenue banks derive from deposit accounts. Overdraft and NSF fees exceeded $15.4 billion in 2019. By comparison, banks make only about $1 billion annually in account maintenance fees. Since the back-end fees are the bulk of the price, there is effectively no price competition amongst the major banks for deposit accounts. …
Credit Cards. Fees represent about 20% of the total cost of credit cards. Card issuers charged $23.6 billion in fees in 2019 alone and nearly $14 billion of those fees were late fees not subject to competitive pricing pressure. Nearly every bank charges the same for late fees – the maximum allowed by law of $30 for the first late payment and $41 for subsequent late payments – and the average late fee has increased to $31, nearing the average of $33 before the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009.
Remittances and Payments. Financial institutions charge “convenience” fees on payment transfers, return item fees, stop payment fees, check image fees, online or telephone bill pay fees, ACH transfer fees, and wire transfer fees. International transfers are subject to a significant number of fees as well. In 2017, after observing many abuses, the CFPB issued a Compliance Bulletin on unfair, deceptive, and abusive acts or practices relating to fees for making payments over the telephone, and potential violations of the Fair Debt Collection Practices Act (FDCPA). [The Compliance Bulletin is available here] These kinds of convenience fees are still common.
Mortgages. Mortgages facilitate homeownership for millions of people, and, through homeownership, allow millions of families to build and maintain intergenerational wealth. But priced into most mortgages are thousands of dollars in application fees and closing costs, which few people are well-positioned to shop on. These fees can act as a barrier to homeownership, strip wealth from homeowners accessing their equity through refinancing or home sales, and deter some homeowners from refinancing when doing so would lower total housing costs and be financially advantageous. Advocates and reporters have noted that many closing costs, like title insurance, may not always be subject to standard or appropriate competitive forces. Even aside from inflated and padded fees rolled into the mortgage at closing, homeowners can find themselves forced to pay fees for making payments over the phone or online or even for the servicer’s bill pay service. Borrowers who face financial hardship and struggle to make mortgage payments can find themselves unable to catch up due to the snowballing of a plethora of fees related to the mortgage delinquency. Monthly property inspection fees, new title fees, legal fees, appraisals and valuations, broker price opinions, force-placed insurance, foreclosure fees, and miscellaneous, unspecified “corporate advances” can all price a homeowner out of a home.
Other Loans. The CFPB is interested in other loan origination and loan servicing fees, including for student loans, auto loans, installment loans, payday loans, and other types of loans. For example, some servicers charge fees to reschedule payment dates or make online or phone payments. Loan originators often charge application fees and some even charge to receive loan proceeds in an expedited manner.
The RFI asks consumers to:
… Tell us about your experiences with fees associated with your bank, credit union, prepaid or credit card account, credit card, mortgage, loan, or payment transfers, including:
- Fees for things you believed were covered by the baseline price of a product or service.
- Unexpected fees for a product or service.
- Fees that seemed too high for the purported service.
- Fees where it was unclear why they were charged.
The RFI doesn’t just target fees charged by banks or credit unions. “Companies across the U.S. economy are increasingly charging inflated and back-end fees to households and families,” the CFPB wrote. “This new ‘fee economy’ distorts our free market system by concealing the true price of products from the competitive process. For example, hotels and concert venues advertise rates, only to add ‘resort fees’ and ‘service fees’ after the fact. And fees purportedly charged to cover individual expenses, like paperwork processing, can often greatly exceed the actual cost of that service.”
Make your voice heard
The League will reply to the CFPB’s RFI, and we’d like your input to help us defend the use of various fees – which, of course, are disclosed clearly and conspicuously up-front, giving consumers options to shop for the best alternatives. Please write to Paul Guttormsson at The League with your input by March 25, so that we can be sure our letter reflects credit unions’ concerns. Our comments are due to the CFPB by the end of March.